[Senate Hearing 109-82]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 109-82

     PASSING THE BUCK: A REVIEW OF THE UNFUNDED MANDATES REFORM ACT

=======================================================================

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
                 THE FEDERAL WORKFORCE AND THE DISTRICT
                        OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               ----------                              

                             APRIL 14, 2005

                               ----------                              

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs







                                                         S. Hrg. 109-82

     PASSING THE BUCK: A REVIEW OF THE UNFUNDED MANDATES REFORM ACT

=======================================================================

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
                 THE FEDERAL WORKFORCE AND THE DISTRICT
                        OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 14, 2005

                               __________

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs


                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2005
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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                      Amy B. Newhouse, Chief Clerk


   OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE 
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                  GEORGE V. VOINOVICH, Ohio, Chairman
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
NORM COLEMAN, Minnesota              CARL LEVIN, Michigan
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

                   Andrew Richardson, Staff Director
              Richard J. Kessler, Minority Staff Director
            Nanci E. Langley, Minority Deputy Staff Director
                       Tara E. Baird, Chief Clerk





                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Carper...............................................     3
    Senator Coleman..............................................    14
    Senator Coburn...............................................    28
Prepared statement:
    Senator Lautenberg...........................................    33

                               WITNESSES
                        Thursday, April 14, 2005

Orice M. Williams, Director, Strategic Issues, U.S. Government 
  Accountability Office..........................................     5
Hon. John Graham, Administrator, Office of Information and 
  Regulatory Affairs, Office of Management and Budget............     7
Elizabeth Robinson, Deputy Director, Congressional Budget Office.     8
Hon. John Hurson, Delegate, Maryland House of Delegates, and 
  President, National Conference of State Legislatures...........    21
Hon. Colleen Landkamer, Commissioner, Blue Earth County, 
  Minnesota, and First Vice President, National Association of 
  Counties.......................................................    23
Hon. Nick Licata, City Council Member, Seattle, Washington, on 
  Behalf of the National League of Cities........................    25

                     Alphabetical List of Witnesses

Graham, John:
    Testimony....................................................     7
    Prepared statement...........................................    49
Hurson, Hon. John:
    Testimony....................................................    21
    Prepared statement...........................................   112
Landkamer, Hon. Colleen:
    Testimony....................................................    23
    Prepared statement with an attachment........................   119
Licata, Hon. Nick:
    Testimony....................................................    25
    Prepared statement with attachments..........................   167
Robinson, Elizabeth:
    Testimony....................................................     8
    Prepared statement with an attachment........................    54
Williams, Orice M.:
    Testimony....................................................     5
    Prepared statement...........................................    34

                                Appendix

A CBO's report entitled ``A Review of CBO's Activities in 2004 
  Under the Unfunded Mandates Reform Act,'' March 2005...........    62
Survey by National Association of Counties entitled ``Unfunded 
  Mandates: A Snapshot Survey,'' March 2005, submitted by Ms. 
  Landkamer......................................................   127
Questions and responses for the Record from:
    Ms. Williams.................................................   187
    Ms. Robinson.................................................   192
    Mr. Hurson...................................................   196

 
     PASSING THE BUCK: A REVIEW OF THE UNFUNDED MANDATES REFORM ACT

                              ----------                              


                        THURSDAY, APRIL 14, 2005

                                     U.S. Senate,  
          Oversight of Government Management, the Federal  
            Workforce, and the District of Columbia Subcommittee,  
                            of the Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:04 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Coleman, Coburn, and Carper.
    Senator Voinovich. Good morning. Thank you all for being 
here today.
    Today, the Subcommittee on the Oversight of Government 
Management, the Federal Workforce, and the District of Columbia 
meets to examine a subject in which I have long been 
interested. I am pleased that my colleague and former governor, 
Senator Carper, is serving as Ranking Member of this 
Subcommittee today. The two of us have been concerned about 
this a long time.
    Today's hearing entitled, Passing the Buck, A Review of the 
Unfunded Mandates Reform Act will review UMRA's impact on 
Federal, State and local governments. Over the course of my 
career as a State representative, county auditor, commissioner, 
lieutenant governor, and mayor I first watched the relationship 
between the Federal Government, its State and local 
counterparts affecting our citizens and our communities.
    My experience fuels my passion for federalism. I understand 
the importance of balancing the Federal Government's power with 
the powers our founding fathers envisioned for the States and 
that is why in 1991, as a member of the National Governors 
Association, I started a long campaign with the State and local 
government coalitions to curb the practice of Federal unfunded 
mandates. It's really interesting that at my first governors 
meeting I had this resolution on unfunded mandates, and there 
was this governor who came over and put his arm around me and 
said, partner, I am with you on this. That was Bill Clinton.
    As Governor of Ohio I requested a first of its kind study 
to examine the impact of unfunded mandates. In the introduction 
to this report I noted that too often Federal mandates on the 
States interfere with one of the most fundamental tasks of 
government, the setting of priorities. State officials 
entrusted by the voters with the responsibility to set a course 
for State Government, provide services and plan for the future 
find their ability to do these things constrained by Federal 
directive that take legal or statutory precedence. According to 
our findings, between 1992 and 1995, Ohio had unfunded mandates 
of $1.7 billion.
    This unique report served three important purposes in the 
unfunded mandates debate. First, it illustrated the growing 
mandate problem in my State.
    Second, it galvanized lobbying efforts of the big seven by 
providing them with evidence that unfunded mandates have a real 
impact on State and local governments.
    Finally, it underscored the importance of enacting Federal 
unfunded mandate legislation in Congress. And thankfully, State 
and local efforts to pass UMRA were supported strongly by Dirk 
Kempthorne, William Roth, John Glenn, Representatives Rob 
Portman, Tom Davis, and Bill Clinger.
    One of the highlights of my tenure during my term as 
governor was working with Congress on this vital issue. As a 
matter of fact the first time I set foot on the floor of the 
U.S. Senate was when UMRA was passed on March 15, 1995. I was 
honored to be at the Rose Garden representing State and local 
governments when President Clinton signed the legislation on 
March 22, 1995 and I have that pen that he used to sign it 
proudly displayed on the walls of my office today.
    When I was elected to the Senate I vowed to continue 
examining how the Federal Government could improve the way it 
works with all levels of government to better serve the 
American people. My interest in federalism and my involvement 
in the passage of UMRA led me to request a two-part GAO review 
of the law. The first report issued in May 2004 provided a 
general overview of UMRA and analyzed the law's effectiveness. 
In this review, GAO found evidence that UMRA is limiting the 
number of Federal mandates, but that its procedures, 
definitions, exceptions, and exclusions might still allow some 
unfunded mandates to reach State and local governments.
    For example, in 2001 and 2002, GAO found that only 5 of 377 
statutes enacted and 9 of 122 major regulations issued 
contained mandates above UMRA thresholds. However, over the 
same time 43 statutes were enacted and 65 regulations issued 
that might be perceived as mandates but were not identified as 
such.
    For example, the No Child Left Behind Act, which I voted 
against because I was concerned about its cost and the policy 
of federalizing education, was not identified as an unfunded 
mandate because it is a condition of Federal financial 
assistance. In order for States to receive funding under the No 
Child Left Behind Act they must demonstrate that they are 
meeting Federal requirements established for educational 
standards and assessments.
    However, if States can provide compelling reasons they may 
opt out of the law and forgo Federal funding. Unfortunately, 
this portion of the law was considered a condition of Federal 
financial assistance under UMRA and, therefore, did not meet 
the definition of a mandate. We call it a mandate, but under 
the law it's not an unfunded mandate.
    The second part which GAO is releasing this morning 
explores whether changes are necessary to strengthen the law. I 
would like Ms. Williams to know that the second panel of 
witnesses will be listening intently as you detail your 
findings this morning. I am extremely interested in hearing how 
my friends in State and local government react to both of GAO's 
studies and if they believe that changes in the law are 
required.
    As many of you know, the process of strengthening UMRA 
began this year with a provision in the budget resolution. I 
was pleased that the Budget Committee, Chairman Gregg added 
language to increase UMRA's point of order from 50 to 60 votes. 
I believe this provision will strengthen UMRA and ultimately 
make it much more effective.
    I would like to thank GAO for their hard work and 
dedication on producing two comprehensive and informative 
reports on UMRA. In addition, I want to send a warm welcome to 
the rest of our witnesses, including my colleagues from State 
and local governments. I look forward to discussing this issue 
with you today and I now yield to my good friend, the Senator 
from Delaware, Senator Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thank you, Mr. Chairman. Mr. Chairman, I 
have a statement I'd like to submit for the record, if I may.
    Senator Voinovich. Without objection.
    [The prepared opening statement of Senator Carper follows:]
              PREPARED OPENING STATEMENT OF SENATOR CARPER
    Thank you, Mr. Chairman. It's a pleasure to sit with you here today 
in this capacity to discuss an issue that's been so important to both 
of us during our careers in public service--the impact unfunded Federal 
mandates have on State and local governments and what we can do to 
address them.
    When I was governor, we were able to balance our budget every year 
I was in office. We were also able to cut taxes 7 out of the 8 years I 
was fortunate enough to be entrusted by the people of Delaware with 
their governorship. Times were good, then, but it still angered me to 
think that our job was made more difficult because of the money our 
State was spending to comply with Federal mandates we had little role 
in crafting and oftentimes probably didn't agree with.
    Unfunded mandates are still around today and they're still a drain 
on State and local resources. We'll hear testimony this morning from 
witnesses on our second panel that Federal mandates, whether we think 
they're meritorious or not, still have a staggering impact on budgets 
in our States, counties and cities. That said, the Unfunded Mandates 
Reform Act that you played such a key role in bringing to fruition a 
decade ago, Mr. Chairman, appears to have been a success.
    While there's still work to be done, it's clearer now than it was 
before the passage of the 1995 Act that Federal legislative and 
regulatory actions have an impact outside of Washington, DC. Because of 
the tools built into the Act, the Federal Government probably imposes 
fewer, less burdensome mandates on State and local governments.
    As we'll hear today, only a fraction of the legislative and 
regulatory mandates examined under the Act have been deemed unfunded 
from year to year. This could be because legislators and regulators 
have learned their lesson and are cooperating with the officials on the 
ground in State and local governments who are impacted by their 
actions. It could mean we're avoiding actions that might unnecessarily 
or unfairly push costs down to other levels of government. Others will 
argue, however, that it's because the Act is not strong enough and is 
not applied to much of the work done here in Washington from day to 
day.
    I look forward to hearing from our witnesses today about how the 
1995 Act has worked and what might need to be done to improve it. While 
it's not possible to eliminate altogether all Federal mandates that 
impose costs on State and local governments, we should see if it's 
possible to get a better sense of how much a given law or regulation 
will truly cost State and local governments. This should give 
decisionmakers like you and me, Mr. Chairman, the information we need 
to make more informed choices when developing legislation that might 
impact State and local budgets.
    I'd also like to learn some more about any gaps in the 1995 Act 
that allow mandates that should be more heavily scrutinized to escape 
our attention.
    Thank you again for holding this hearing, Mr. Chairman. I look 
forward to hearing from our witnesses and to working to ensure that 
work Congress did a decade ago continues to be effective.

    Senator Carper. Thank you.
    Now to our witnesses, welcome this morning. This is one 
issue that Senator Voinovich and I have been joined at the hip 
on for some time. While Bill Clinton no longer has his arm 
around him and saying, partner, we are working on this one 
together, Senator Voinovich and I very much are partners in 
this endeavor. I think the good work that he did, the 
leadership that he provided more than a decade ago has not been 
for naught. Some good has come from that effort.
    As in most things, can we do a better job? Sure, we can. 
Can we do a better job here with respect to unfunded mandates? 
Sure, we can. Part of what I hope comes out of today's hearing 
is a bit of a path forward, some consensus on what further 
changes need to be made.
    I, too, am encouraged by the change that was reflected in 
the budget resolution with respect to raising a point of order 
to 60 votes. I think that's a positive step. There may be some 
other things that we ought to be doing and considering, and 
hopefully we'll hear some of that from our panel. So we thank 
you all for being here and look forward to your testimony and 
the chance to have a conversation with you.
    Thanks, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Carper.
    We are pleased that we have Senator Coburn from Oklahoma. 
Senator, do you have a statement?
    Senator Coburn. Mr. Chairman, I don't have a written 
statement. I would just, first of all, apologize in advance. We 
are in the midst of an executive committee meeting in Judiciary 
so I'll be in and out and intermit with my attendance. I am 
very appreciative that you're holding this hearing. I believe 
there are still way too many mandates coming out of Washington 
for States and local communities, and many of them, although we 
call them funded, they're not. So there is a difference between 
an unfunded mandate and an underfunded mandate, and the way we 
are getting around the law today is underfunding the mandates. 
So I look forward to studying this report and also the 
testimony of your witnesses today, and thank you for holding 
the hearing.
    Senator Voinovich. Thank you very much.
    We do have two excellent panels today and I look forward to 
a good discussion. All witnesses' statements will be entered 
into the record in their entirety and I'd appreciate it if you 
would limit your remarks to 5 minutes.
    It's the custom of the Subcommittee to require swearing in 
our witnesses and if you will stand, and those from the local 
governments stand, I'll swear you in.
    [Witnesses sworn.]
    Senator Voinovich. Let the record show that all of the 
witnesses answered in the affirmative. Our first panel of 
witnesses, Orice Williams is Director of Strategic Issues at 
the Government Accountability Office and served as the project 
leader on the unfunded mandate report. We are so glad that 
you're here, and GAO did a super job, as they always do.
    Dr. Graham is the Administrator of the Office of 
Information and Regulator Affairs at the Office of Budget and 
Management. Dr. Graham, welcome back to this Subcommittee. We 
haven't seen you for some time. We do remember the hearings on 
your nomination. There was some controversy about them and I 
told my colleagues that you would be the best OIRA director 
that we could get and you've done an outstanding job over there 
of looking after regulations in the Federal Government. I was 
pleased that you're there.
    Mr. Graham. Thank you, sir.
    Senator Voinovich. In my opinion, you have really thrown 
the ball down the middle. I've watched some of the decisions 
you've made and I want to congratulate you. I think you're 
really doing the job that we expect you to do.
    Dr. Elizabeth Robinson is the Deputy Director of CBO. I 
want to thank CBO for the outstanding job that you have done in 
providing mandate statements. It's a lot of work. I think 
you've got four or five people over there that work on it on a 
continuing basis. They're here today. I understand that the 
team leader is Terri Gullo, and I want to thank you, Terri, for 
your leadership. This issue that may not seem important to some 
people but I can tell you it's really important to the local 
government officials that are here and local government 
representatives throughout the United States.
    We'll start out with Ms. Williams.

TESTIMONY OF ORICE M. WILLIAMS,\1\ DIRECTOR, STRATEGIC ISSUES, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Williams. Mr. Chairman, and Members of the 
Subcommittee, thank you for the opportunity to participate in 
today's hearing to discuss the Unfunded Mandates Reform Act of 
1995, commonly known as UMRA. My statement this morning focuses 
on two reports issued by GAO in the past year at your request.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Williams appears in the Appendix 
on page 00.
---------------------------------------------------------------------------
    First, in May 2004 we issued a report that identified a 
number of issues surrounding the gap between Federal mandates 
under the Act and those that may be viewed as mandates by 
affected parties. As a follow-up to that report you asked that 
we obtain the views of a diverse group of parties knowledgeable 
about UMRA as well as Federal mandates.
    In summary, we found that identifying and analyzing Federal 
mandates is a complex process under UMRA. This is due primarily 
to the Act's various definitions, exceptions, and exclusions. 
In 2001 and 2002, the period covered by our review, as you 
mentioned only 5 of the 377 statutes enacted and 9 of 122 major 
or economically significant final rules issued were identified 
as containing Federal mandates at or above UMRA's thresholds. 
Of these, only one final rule contained an intergovernmental 
mandate.
    Despite the application of UMRA and the paucity of actions 
identified as mandates under the Act, we found other provisions 
of statutes and rules that did not trigger UMRA requirements, 
but appear to have potential financial impacts similar to those 
identified as containing Federal mandates at or above UMRA 
thresholds. As a result, many were viewed as unfunded or 
underfunded mandates by affected parties.
    Building on those findings, as requested, we asked a 
diverse group of parties from academia, business, Federal 
agencies, public interest advocacy groups, and State and local 
governments to share their views about strengths and weaknesses 
of UMRA and Federal mandates. Two issues quickly emerged.
    First, UMRA's coverage was the first issue cited across 
sectors. The vast majority saw UMRA's coverage as a weakness of 
the Act because it excludes many potentially significant 
actions from the scrutiny of UMRA. Most offered ways that the 
Act's coverage could be expanded. However, a few disagreed, 
believing the Act should, in fact, be kept narrow.
    Second, parties across the sectors also raised a number of 
issues concerning the lack of evaluation and research of 
mandates in general. They felt more and better retrospective 
analysis would result in better information about the costs and 
benefits of mandates and could potentially improve prospective 
analysis.
    In closing, Mr. Chairman, I would like to reiterate our 
findings and share a few observations.
    First, of the 100-plus comments provided, almost one-third 
pointed out the strengths of UMRA, and even its harshest 
critics did not suggest that the Act be repealed.
    Second, and not surprisingly, coverage continues to be an 
issue in most sectors. To the extent that UMRA plays a role in 
shining a light on unfunded mandates, there is some evidence 
that UMRA has resulted in fewer legislative mandates at or 
above UMRA's thresholds. Although UMRA does not ban the 
imposition of unfunded mandates, broadening coverage would 
result in more information about a wider range of Federal 
actions, but not necessarily prevent them.
    Third, as I mentioned at the onset, retrospective analysis 
emerged as a key issue when discussing Federal mandates. We 
heard repeatedly about the need for various types of analysis 
to evaluate existing programs, but also as a tool to improve 
the design and prospective analysis of future actions.
    Finally, as we move forward in an environment of 
constrained fiscal resources, the issue of unfunded mandates 
raises broader questions about the assignment of fiscal 
responsibilities within our Federal system. Most major domestic 
programs, costs, and administrative responsibilities are 
shared. Therefore, part of this public policy debate includes a 
re-examination of the Federal Government's role in our system, 
and a need to sort out how responsibilities for these types of 
programs should be financed in the future. If left unchecked, 
unfunded mandates can weaken accountability and remove 
constraints on decisions by separating the enactment of benefit 
programs from the responsibility of having to pay for these 
programs. Likewise, 100 percent Federal financing of 
intergovernmental programs can pervert fiscal incentives 
necessary to ensure proper stewardship at the State and local 
level for shared programs.
    This concludes my oral statement and I would be happy to 
answer any questions.
    Senator Voinovich. Thank you, Ms. Williams. Dr. Graham.

  TESTIMONY OF HON. JOHN GRAHAM,\1\ ADMINISTRATOR, OFFICE OF 
 INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND 
                             BUDGET

    Mr. Graham. Good morning, Mr. Chairman, and Senator Carper.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Graham appears in the Appendix on 
page 00.
---------------------------------------------------------------------------
    As you know, an important reason for the enactment of the 
Unfunded Mandates Act was to ensure that Congress and the 
Executive Branch better understood and considered the impact of 
laws and regulations on our intergovernmental partners and on 
the private sector before these laws and regulations were 
enacted. The Administration firmly supports the principles on 
this Act and we have been working to increase the opportunities 
for our intergovernmental partners to participate fully in the 
regulatory process.
    Let me give you some feel how this Administration has 
compared to previous administrations on the rate of growth in 
unfunded mandates. I guess it's the story of Washington, DC, 
when you talk about progress you only talk about rates of 
growth in things. You never actually reduce anything. But, 
nonetheless, that's the situation we are in.
    When OMB began to keep records in 1981 we tracked major 
rules on State and local governments and the private sector. 
During that 24-year period from 1981 to 2004, the average 
annual growth rate in these major rules was about $5 billion 
per year on top of the existing several hundred billion dollars 
a year in regulatory costs. During the President's first term 
we reduced that rate of growth to under $2 billion per year, or 
about 68 percent lower than the 24-year average. These 
statistics, while they're not in my written statement, are in 
the annual report to Congress which we have provided you under 
the Regulatory Right-to-Know Act.
    So the good news is that we are slowing the growth rate or 
unfunded mandates. The bad news is we haven't really yet been 
effective of that getting at the existing base of these 
unfunded mandates.
    Let me conclude with a few remarks about my experience in 
the Executive Branch dealing with regulatory agencies on the 
subject of what are the conceptual solutions to a proposal for 
an unfunded mandate. Let's remember that they're often times 
very exciting and noble ideas that are behind unfunded mandates 
even though they don't have any funding behind them.
    The first potential conceptual solution to that problem is 
to fund the unfunded mandate at the Federal level. Let me 
assure you that my budget colleagues at OMB hearing me even 
utter that sentence would be shuddering about the prospect of 
all of that Federal spending. But I think we recognize that 
conceptually this is one of the possible solutions to the 
problem. It needs to be examined, and clearly it needs to be 
examined in the context of an overall fiscal approach to the 
Federal Government.
    A second conceptual response to the proposal for an 
unfunded mandate is to reject the unfunded mandate and simply 
allow the State and local governments or the private sector to 
handle the issue as they see appropriate. We, at OMB, look at 
that option, whenever possible, as a potential solution.
    The third solution, and my experience, practically speaking 
it tends to be the most effective, is to find more cost-
effective ways or less costly ways of achieving the purpose of 
the unfunded mandate than were originally contemplated in the 
proposal. Allowing, for example, State and local governments to 
have flexibility to consider less costly ways of achieving 
whatever the objective may be, whether it be in environment, 
whether it be in education and so forth.
    Those, I think, conceptually are the three solutions we 
have when we have a proposal for an unfunded mandate, and I 
think that when you strip away all of the details that's what 
it boils down to. So I look forward to the discussion of the 
Subcommittee and I have my written statement with some details.
    Senator Voinovich. Thank you, Dr. Graham. Dr. Robinson.

     TESTIMONY OF ELIZABETH ROBINSON,\1\ DEPUTY DIRECTOR, 
                  CONGRESSIONAL BUDGET OFFICE

    Ms. Robinson. Thank you. Good morning, Mr. Chairman and Mr. 
Carper. I am very glad to be here today to discuss the Unfunded 
Mandates Reform Act and CBO's role in implementing parts of the 
Act. To provide some context, CBO has now about 10 years of 
experience in implementing the Act. During that time we have 
transmitted over 5,200 reviews of specific pieces of 
legislation, and under the definitions in the Act, about 12 
percent of those found mandates on States and localities, and 
14 percent found such mandates on the private sector.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Robinson appears in the Appendix 
on page 00.
---------------------------------------------------------------------------
    Now as you know, UMRA not only requires that we identify 
mandates but that we estimate their cost and compare those 
costs to the thresholds that are established in the Act. A much 
smaller universe of the mandates we see actually have costs 
higher than those thresholds. Again, for the total universe of 
5,200 only about 1 percent had mandates on States and 
localities, as defined in the Act, with costs above the 
threshold, and about 3 percent private sector mandates with 
costs above the threshold.
    At the same time, we can't always estimate the size of 
these mandates, especially if there are many more steps in the 
process that have to happen after the mandate is enacted; 
regulations promulgated by the Executive Branch or other 
things. So UMRA also requires that if we say we can't estimate 
the cost, we also explain why. A similar number of bills to 
those that actually contain mandates with costs over the 
threshold have not been estimable by CBO at the time the 
legislation was being considered by the Congress.
    Also, as bills are considered by the Congress, we find that 
only about a third of those where we identify mandates with 
costs over the thresholds, I guess about 20 percent on States 
and localities and about a third on the private sector, 
actually get enacted into law. That's not surprising to us 
actually because during the process members and their staff are 
very interested in the impacts of their legislation on States, 
localities, and the private sector. They work with us on 
specific provisions. They ask us for whatever information we 
can give them. They then respond; for example, the House has 
brought up UMRA points of order and committees have modified 
mandates on the Floor and sometimes they have provided funding 
as well to cover the cost of the mandate.
    So in a very broad brush way and in terms of procedure, the 
Act has been implemented fairly smoothly over the last 10 
years. But during that time there's been a lot of concern about 
the definitions in the Act, whether or not they're providing 
the information that policymakers need as they're going through 
the legislative process to adequately assess what the impact of 
the legislation is going to be.
    GAO has already very ably mentioned that one of the biggest 
problems concerns legislation that would change conditions for 
existing grant programs. When a State is already participating 
in a grant program and the conditions are changed, and if those 
conditions cause them to spend more money, it can feel like a 
mandate. It may not be a mandate under UMRA but it can feel 
like a mandate. We hear that often and try to work with staff 
to understand how UMRA defines mandate as those kinds of bills 
go through the process.
    At a much smaller level, a more technical level, there are 
some aspects of the definitions in UMRA that CBO would 
appreciate some legislative clarification on. We have mentioned 
these as they come up in the various statements that we put 
forward, but there are two central questions that we have had 
to face over the years.
    One question is that if the bill extends an existing 
mandate, is that actually a new mandate that then should be 
considered under the procedures of UMRA?
    The second is, what happens if a bill does not itself 
create a mandate but, by its actions, it triggers spending 
under other existing mandates? Should that bill be considered 
under UMRA as containing a mandate?
    Senator Carper. Would you say that again?
    Ms. Robinson. If you have a bill that, for instance, sites 
a facility in a specific area and that's all it does, but that 
triggers spending on the part of the States in order to provide 
transportation going there under Federal regulation, maybe 
environmental regulations, and those costs exceed the 
threshold, does that bill then contain a mandate? Those 
mandates were created in previous bills, but the siting of a 
facility would trigger additional spending. So is that a 
mandate under UMRA?
    We think it's very timely that now, after 10 years and a 
lot of experience implementing UMRA, that the Subcommittee 
reconsider this piece of legislation. There have been very few 
changes to the law over the last 10 years and we look forward 
to working with the Subcommittee to consider issues as they 
come up. Thank you.
    Senator Voinovich. Thank you very much.
    We are going to have rounds of questions of 6 minutes. The 
first question I have is for all of the witnesses. In the 
second report, GAO noted that many stakeholders would like a 
retrospective evaluation of mandates to ensure they were 
achieving their intended goals and a better measure of the 
actual costs by non-Federal entities. Do you believe that this 
process would help measure the actual cost of mandates? If so, 
who should be responsible for conducting such an evaluation for 
both laws and regulations?
    Mr. Graham. Let me start by just giving you, Senator, some 
ballpark and sobering numbers on that subject. Since OMB began 
to keep records in 1981--so that includes some of the pre-UMRA 
period, OMB has cleared 20,000 Federal regulations.
    Senator Voinovich. How many?
    Mr. Graham. Twenty thousand. Most of those, to the best of 
our knowledge, have never been re-examined to determine how 
much they actually cost or what their effective was. We could 
get you those same numbers for the period in the 1990's of the 
UMRA period.
    The question of who should perform those evaluations, I 
think, is a difficult one. On the one hand, the agencies 
themselves might seem to be a logical place to go for an 
evaluation. But then one could argue that maybe they're not in 
the most objective position to evaluate the regulations that 
have promulgated. Some would say OMB should be involved in that 
activity, but I can assure you some would say that we are not 
the most objective people to evaluate those.
    So, I think one thing that needs to be given thought to is 
the question of where that most objective evaluation of those 
would come from. I think in our report to Congress we have 
actually asked for public comment on about 15 independent 
academic studies that have been done of the evaluation of the 
costs and benefits of previous regulations, and in the process 
we'll be learning more about the subject about how good this 
literature is in its technical quality and how it can be 
expanded in the future.
    Ms. Williams. Just to expand on that. In terms of looking 
at retrospective analysis, two things were made very clear to 
us. One, when conducting this type of analysis it's important 
to look at the costs that were estimated versus the actual 
costs as well as the benefits. And two, to perform this type of 
analysis to inform prospective analysis. I think in terms of 
the agencies having a role, to the extent that the agencies 
perform this type of analysis it may actually strengthen their 
ability to perform analysis going forward in the future.
    Senator Voinovich. Dr. Robinson.
    Ms. Robinson. CBO is always supportive of more analysis. We 
would love to have more analysis on how these mandates have 
turned out. But we also have a number of questions that, I 
think, would have to be answered in that kind of retrospective 
review.
    One is, what would the States and localities have done 
otherwise? Many mandates that we see going through require for 
the majority of States something that some States have already 
embarked upon. Would it be that in the intervening period after 
the mandate is enacted other States would not have taken this 
up in the absence of the Federal mandate? So trying to 
determine the counterfactual, what is it that you're measuring 
against, is something that I think we'd need to think hard 
about when we are quantifying these costs.
    Senator Voinovich. Dr. Graham, you look at these 
regulations and come back and try to define whether or not 
they're an unfunded mandate. Do you just take all your 
regulations and go back and look at them and see what their 
cost is afterwards? In other words, Congress passes a law 
requiring agencies to issue regulations and there's an estimate 
of what that regulation is going to cost, so you do that. But 
so often after it has passed the cost skyrockets. Is there any 
way that those kinds of regulations are flagged after the fact?
    Mr. Graham. We do provide an opportunity, Senator, each 
year through OMB's report to Congress on regulation which was 
developed through the Regulatory Right-to-Know Act, which I 
know you supported with Senator Thompson when it was passed. 
What that report does each year is it provides the public, 
including State and local governments, an opportunity to 
suggest specific regulations that they believe are more costly 
than they were originally thought, or are outmoded, or don't in 
fact provide benefits.
    That opportunity has been available in 3 of the first 4 
years of this Administration. We have received a substantial 
number of comments. Most of them, however, are from the private 
sector groups that are affected by unfunded mandates. We have 
had fewer comments from our State and local intergovernmental 
partners.
    Senator Voinovich. I have been concerned about the roles 
and regulations issued by the Environmental Protection Agency 
and the impact they have on local communities. In many 
instances, the cost of them is very large, and in so many 
instances there is no flexibility in terms of how long it would 
take to comply with the mandate.
    For example, I've got one case of the city of Akron, Ohio 
has agreed to comply with the provisions in terms of storm flow 
overflow. It's very expensive and they want to implement it 
over 30 years and the EPA says they must do it in 15 years. 
I've asked EPA to look and see why something can't be done 
about that and their attitude is, that's just the way it is. 
From my perspective, it's an unfunded mandate, and we keep 
cutting back the amount of money made available to State and 
local governments for a lot of these things that are being 
mandated and there doesn't seem to be any fairness.
    In other words, if we are not going to provide the 
funding--we start out providing the funding and then we keep 
ratcheting back what we are providing, that increases the cost 
to the local governments, but there is no consideration given 
to that impact or the time it takes to get the job done. It 
seems to me that there are a lot of areas like that. We really 
should look at the regulations that are turning into unfunded 
mandates for local governments because the feds have just 
pulled back on funding them.
    For example--I'll finish on this--the President has 
recommended eliminating approximately 150 programs. Have you 
examined those programs set for elimination? In effect we 
eliminated funding but the requirement to fulfill the Federal 
law still exists, but now State and local governments are going 
to have to pick up the tab.
    Mr. Graham. As I mentioned in by oral remarks, there are 
three solutions to an unfunded mandate. Fund it, remove the 
mandate, or find less costly alternatives for addressing the 
objective, like your example of a 30-year phase-in period 
rather than 15 years. Those are the only three possible 
solutions that we have been able to find when an unfunded 
mandate is proposed, and all of them are painful in some ways. 
As a practical matter, most of the progress we make at OIRA on 
these issues is in the third category, let's be more creative 
about finding ways to provide flexibility so people can achieve 
the objective at lower cost. That tends to be, at a practical 
level, the most successful approach.
    Senator Voinovich. Thank you. Senator Carper.
    Senator Carper. Thank you. Again, our thanks for your 
testimony today. I just want to come back and revisit some of 
what you've already said just to help me synthesize it in my 
mind. Is the consensus that the effect of the 1995 bill has 
generally been a positive one in terms of, if not reducing 
unfunded mandates, at least reducing the growth of those 
unfunded mandates? How would you all characterize the 
effectiveness of the bill?
    Ms. Williams. In terms of the parties we spoke with there 
were definitely sectors that held that sentiment, that it was 
definitely a step in the right direction and it has had some 
impact on the growth of unfunded mandates, especially on the 
legislative side.
    Senator Carper. When you say especially on the legislative 
side, you're talking legislation as opposed to regulatory 
unfunded mandates?
    Ms. Williams. Correct, yes.
    Senator Carper. Dr. Graham.
    Mr. Graham. Just to elaborate, and keep in mind that the 
analytic requirements that were put in UMRA for regulations on 
the Executive Branch were similar to Executive Order 
requirements that were already in place prior to UMRA. So the 
big effect was on the legislative side, as the previous answer 
indicated.
    I think your summary of it is a good one. I would say there 
has been progress in slowing the growth in new unfunded 
mandates. However, a weakness in our situation is that we 
haven't been able to get at very effectively that sea of 
existing unfunded mandates that are already out there, and 
figuring out a way to evaluate whether they're still effective, 
whether there are more cost-effective ways to address those 
issues. That's a much bigger challenge.
    Senator Carper. Dr. Robinson, same question.
    Ms. Robinson. In terms of the analytical requirements and 
procedures that CBO helps to implement, people are very 
interested in it; members and staff. They're consuming that 
information. They're paying attention to it. They find it 
useful within the limits of the Act itself. So if that's a 
measure, that they are considering the information as 
legislation goes forward and getting the kinds of responses 
they need, then yes, I think it has helped quite a lot.
    Senator Carper. The second question would be, if you're 
sitting up here instead of where you're sitting, what would you 
do, either to work further on the legislative mandates, or to 
work on the regulatory mandates? If you were a U.S. Senator, or 
if you were a member of this Subcommittee, what would you do?
    Ms. Williams. I think based on the conversations we had 
with the parties from the various sectors, one of the 
interesting issues that emerged, and it isn't really a 
surprising one, is the issue of coverage. You can ask about the 
number of unfunded mandates, or the number of mandates at or 
above UMRA's thresholds and the numbers are relatively small. 
But when you talk to parties affected by mandates that go 
beyond those identified in UMRA the numbers are much larger. So 
if you look at the issue of coverage and where the bar is, it 
raises issues about whether or not UMRA actually covers all 
actions that affected parties view as unfunded or underfunded 
mandates.
    Senator Carper. So let me just ask my question again. What 
would you do?
    Ms. Williams. I think in terms of----
    Senator Carper. There's no right or wrong answers here. I 
just want to know, what would you do?
    Ms. Williams. I think this is the point. After 10 years of 
experience, now's the time to revisit some of the provisions of 
UMRA and ask if all of the exclusions and exemptions still make 
sense in today's environment, and bring parties from the 
sectors that we spoke with to the table to get their input on 
whether or not all of them still need to be in place today. So 
that's where I would start if I were in your shoes.
    Senator Carper. Thank you. Dr. Graham.
    Mr. Graham. I think I would look to the question of how 
valid are the cost estimates that are made on unfunded mandates 
at the time members must vote on them or we at OMB must rule on 
them. We now have 10 years of experience to look at the cost 
estimates that were made before these mandates were imposed. 
Let's find out exactly how much they actually did cost, how 
many times was it greater than we thought, how many times was 
it less than we thought. As an analyst my hope is a lot of 
times we get that answer roughly right. But we need to know the 
answer to that question to know how much confidence we should 
put behind these estimates of the cost of unfunded mandates, 
and I think it would be useful if you could stimulate that work 
to be done.
    Senator Carper. Thank you. Dr. Robinson.
    Ms. Robinson. I'd like to start out with saying that the 
organic Act for CBO actually prohibits me from telling you what 
I would do if I were a Senator. So with that in mind and me 
wanting to keep my job, one thing I would definitely consider 
is the informational side of the Act--the information in the 
legislative process is always king in terms of affecting things 
and having them move forward. There might be more information 
out there on other types of legislative vehicles like 
expansions of requirements under existing grant programs.
    I would mention, though, that these additional classes of 
legislation would bring in a lot more bills. If we were to try 
to estimate the costs of new conditions on existing grant 
programs for States and localities it would more than double 
the bills for which we would have to do a cost estimate. So I 
might also think about the resources available to CBO for doing 
this. These changes are actually very significant in terms of 
the number of bills that would be affected and how important it 
is to Congress to consider this kind of information for all 
bills moving forward.
    Senator Carper. Thanks. My time has just expired.
    Senator Voinovich. Senator Coleman is here with us. Senator 
Coleman, I think that during your term as mayor of St. Paul, 
the Unfunded Mandates Relief legislation was passed. One of the 
reasons why we were successful in getting it passed is that we 
got terrific support from all of the State and local government 
groups, and it was on a bipartisan basis. It was like a tide 
that just rolled through this place and we got it done. So we 
are glad that you're here today.

              OPENING STATEMENT OF SENATOR COLEMAN

    Senator Coleman. Thanks, Mr. Chairman. I don't think it's 
by accident that the three of us sitting up here are all former 
local elected officials; two former mayors and two former 
governors. You notice there's only three people here, but there 
are two former mayors and two former governors.
    I have a statement that I would like entered into the 
record.
    Senator Voinovich. Without objection.
    [The prepared opening statement of Senator Coleman 
follows:]
             PREPARED OPENING STATEMENT OF SENATOR COLEMAN
    I want to thank Chairman Voinovich and Senator Akaka for holding 
this important hearing to review the Unfunded Mandated Reform Act. I 
also want to take a moment and welcome a constituent of mine from Blue 
Earth County, Commissioner Colleen Landkamer, who will be testifying on 
the second panel today. Commissioner Landkamer is First Vice President 
of the National Association of Counties and has served as Commissioner 
of Blue Earth County since 1988. And, if anyone wants to know where 
Blue Earth County is, you can go back and watch Little House on the 
Prairie reruns and when Laura Ingalls Wilder visited Mankato, she was 
in Blue Earth County. Commissioner Landkamer, I want to thank you for 
your service and I look forward to hearing your testimony today.
    Unfunded mandates have been around for as long as I can remember 
and created real challenges for Saint Paul when I was mayor. When I 
came to Washington, I wanted to bring my experiences from the bottom of 
the political food chain to committee hearings like this to talk about 
how unfunded mandates can hamstring local leaders who are just trying 
to get things done. I can remember being told when I was mayor that 
doing business with the city could easily add 20 percent to the cost of 
a project. Well 20 percent on five houses and you have built another 
house. I was also told that adding $1 of Federal money in an activity 
can trigger thousands of dollars worth of additional requirements. The 
result when I was mayor was that some great ideas never got realized 
because unfunded mandates drove folks away from doing business with us.
    I also remember projects that were almost never realized because of 
the requirements imposed by Federal mandates that were necessary to 
comply with to receive Federal funding. Anyone that has worked with 
local government knows that communities tend to have scarce resources 
and opting out of a Federal program is often not a solution, nor an 
option. That leads to cities putting up with one size fits all 
requirements in order to receive funding.
    Earlier this year, I was proud to introduce an amendment to the 
Senate budget resolution, which was approved, to prevent cuts to the 
Community Development Block Grant Program (CDBG). I bring this up 
because this program is based on the idea that we should not have 1,500 
command and control programs run out of Washington trying to 
micromanage the needs of communities. Instead through CDBG, we help 
communities meet those needs and priorities through one block grant. 
With all the unfunded mandates coming down from Washington, CDBG is one 
way we actually help communities across the country meet some very 
critical priorities without hampering local leaders.
    As Minnesota's Mayor in Washington, I still believe that government 
is beholden to the people. That individuals, with the help of their 
local representatives, can plan their lives better than bureaucrats in 
some distant capital. The Unfunded Mandates Reform Act of 1995 was a 
good first step towards making sure Congress adequately appropriated 
funds for mandates imposed on local governments. However, we still have 
a lot more work to do on this issue. I am pleased that the Senate 
budget resolution raised the threshold to overcome an unfunded mandates 
point of order from a simple majority to 60 votes. It still remains to 
be seen whether this will survive in Conference but it is something I 
hope to get feedback on today. I look forward to hearing the testimony 
of our panelists and their thoughts on what provisions of the Unfunded 
Mandates Reform Act have worked and what needs to be changed.

    Senator Coleman. I will note that the second panel contains 
a friend of mine, Commissioner of Blue Earth County, which if 
you go back and watch Little House on the Prairie and when 
Laura Ingalls Wilder visited Mankato, she was in Blue Earth 
County. So this is the heart of America there, and I want to 
thank Commissioner Landkamer for her service and look forward 
to her testimony.
    I just have two observations. One, this really is for those 
local leaders, it's an important issue. I always tell people 
you never forget when you're at the bottom of the political 
food chain. The feds tell the State, and the State tells the 
county and the cities, and then our taxpayers are the ones who 
have to deal with it, and we hear about it. So I think this was 
important legislation.
    The areas, I just met yesterday with a group of home 
builders in Minnesota and they raised the issue of stormwater 
regulations. It's fascinating, because they actually talked 
about the EPA passing on the enforcement to folks at county, 
State, and city level and they've got various folks now that 
they know how to respond to in dealing with that, and that 
becomes particularly frustrating for them.
    I just want to go back, if I can, to Dr. Graham. The 
question that my colleague, Senator Carper, asked about what 
would you do, your response talked about the validity of cost 
estimates. But in the earlier part of your testimony, one of 
the things you noted, which has been my observation, is that we 
have made progress in slowing up the growth of new unfunded 
mandates but we still have this underlying body of things out 
there that we have to deal with.
    Could I ask you to respond to the question that Senator 
Carper asked about what would you do, specifically focusing on 
that earlier response where you said, we have still got this 
challenge with that body of mandates that are out there that 
are still having some impact? What would you do if you were 
sitting up here dealing with that specific issue?
    Mr. Graham. I am not sure, because we at OMB are humbled by 
the challenge of the sea of existing Federal regulations and 
unfunded mandates that are out there and have accumulated over 
the years. I mentioned, I think before you arrived, that since 
1981 when OMB began to keep records there have been over 
110,000 new Federal regulations adopted by all Federal 
agencies. Twenty-thousand of those we at OMB reviewed and 
cleared. And of those, over 1,100 were estimated to cost the 
economy over $100 million per year at the time that they were 
enacted.
    To the best of our knowledge, nobody has ever looked back 
at most of these regulations to determine what they actually 
cost, what their benefits were, or whether they could be 
accomplished in a better way. And we with two dozen employees 
in the office I work in at OMB are obviously in no position to 
review all of these tens of thousands of regulations. In this 
Administration we have taken one modest step which is, for 
example, we asked the public to nominate specific rules for 
revision. We are working right now, for example, on 76 of them 
that affect the manufacturing sector of the economy.
    Senator Coleman. That's very helpful and it goes back to 
Ms. Williams' comment about engaging again in a conversation 
with some of the folks who are impacted and perhaps they can 
provide us with more focus. Clearly your testimony lays out the 
daunting nature of the task, but perhaps if we can--what I am 
hearing is with a little focus we can begin to make some 
headway, though certainly not clearing the table. So I 
appreciate that.
    Mr. Chairman, I want to thank you for having this hearing. 
This is a very important issue to folks in local government and 
we are all impacted by it so I look forward to good things 
coming out of this as we continue to address this issue. Thank 
you.
    Senator Voinovich. Thank you very much. I would like to 
find out what kind of procedures are in place. When UMRA 
passed, we established procedures requiring Federal agencies to 
consult with State and local governments to get their input on 
what impact it would have on State and local governments. Dr. 
Graham, is there some kind of procedure that is in each 
department that you monitor to make sure that they do try to 
get input from State and local government folks when they are 
doing these regulations?
    And second of all, is there consultation at all with the 
private sector on these regulations, to get their impression 
and get into the issue that you talked about, alternatives that 
are more reasonable?
    Mr. Graham. Yes. Mr. Chairman, we have an annual report to 
Congress on the Unfunded Mandates Act that includes a summary 
of the consultation activities that different Federal agencies 
are undertaking to make sure that State and local governments 
have an opportunity to interact, and my characterization of 
that report is that there are some really good examples of 
consultation that are documented in that report at the 
Department of Education, the Environmental Protection Agency 
and so forth, but I think it would be fair to say that those 
best practices are not necessarily uniform across the Federal 
Government or across any particular agency. We oftentimes, at 
OMB, hear concerns on a particular regulation, that either the 
State and local governments had not been adequately consulted 
or the private sector had not been adequately consulted.
    That is why we at OMB have an open-door policy for outside 
groups to come in and talk to us about their concerns about 
regulations and unfunded mandates.
    Senator Voinovich. I recall that when I was governor we 
lobbied and had passed a provision dealing with the Clean Water 
Act that basically said that you had to use cost benefit 
analysis and regulations in regard to that Act at the time. We 
were requiring local governments every 3 years to take on 25 
new pollutants to check to see whether or not they were in 
their water or not, and we required them to do the most 
advanced technology in terms of cleaning water. We went to work 
on that. Are you familiar with what I am talking about?
    Mr. Graham. Generally. I do not know the specific example 
though.
    Senator Voinovich. I ask because, at the time we were 
interested in including a cost benefit analysis, peer review 
and good science, and then you would then also be required to 
look at alternatives. So that is the Clean Water Act.
    When I came to Congress, my first 2 years here I tried to 
get legislation passed that did the same thing with the Clean 
Air Act. Unfortunately, so many members mistakenly thought that 
I was trying to eviscerate the Clean Air Act, and we never got 
back to it.
    I would really like you to know whether the amendments that 
we made in the Clean Water Act have made it any different in 
terms of their regulations as contrasted to legislation dealing 
with the Clean Air Act. Could you look into that for me?
    Mr. Graham. Yes, sir. I am familiar under the Safe Drinking 
Water Act, which was passed--the amendments of 1996, where 
there were cost benefit and sound science requirements.
    Senator Voinovich. Yes. I mischaracterized that.
    Mr. Graham. I just wanted to make sure we----
    Senator Voinovich. That is exactly what I am talking about, 
yes.
    Mr. Graham [continuing]. Were talking about the same 
provisions.
    Senator Voinovich. Yes.
    Mr. Graham. And I want you to know that we believe they 
have made a significant difference, and in fact, in this 
Administration we have taken the basic approach that was in the 
Safe Drinking Water Act amendments on cost benefit and sound 
science, and incorporated it in government wide guidance under 
the Information Quality Act, where we require all Federal 
agencies, regardless of whether it is an environmental 
regulation or a labor regulation, to have the replicable 
science and an appropriate peer review process on that science. 
And we already have requirements in executive order to look at 
alternatives, less costly alternatives. Quite frankly, that is 
the bread and butter of the work of the Office of Information 
and Regulatory Affairs.
    But having said that, I want to emphasize the fact that if 
Congress, when they pass a statute like the Clean Air Act, says 
that alternatives will not be considered or costs will not be 
considered, that really limits the ability of the Executive 
Branch to bring in the kind of tools you are talking about.
    Senator Voinovich. I would like to really look at what you 
have done with the 1996 Safe Drinking Water Act, and to 
ascertain whether or not as a result of the cost benefit 
provisions and the other provisions that I mentioned, that 
serious damage has been done to the safe drinking water in our 
country, because I really think that at this stage of the game 
we should review and look at our Clean Air legislation in terms 
of cost benefit.
    For example, I was just blown away when I met with the head 
of our EPA about the new requirements under the ambient air 
standards that were litigated. I will finish on this note. He 
basically told me--you would be interested in this, Senator 
Carper, because you and I have been working on this issue--he 
said that in spite of if we pass Clear Skies, the care rule and 
the other rules, that all of the businesses in my State that 
are in counties that are not complying with the current rules, 
that all of the businesses there are going to, in terms of if 
there is any new emissions, are going to have the install 
enormous--spent an enormous amount of money installing those 
particular things to do with their emissions, as they move 
toward compliance with the ambient air standards. And that in 
many instances, some of the counties would absolutely not be 
able to comply with that within a 5-year period, or if they 
did, the cost would just be astronomical.
    I was really shocked at that because I got the impression 
that if we passed Clear Skies and the new regulations dealing 
with diesel fuel, that these counties would be considered to be 
in compliance with, in an attainment because the big burden was 
going to be put on the utilities, and we were cleaning up our 
diesel gasoline. So this thing is going to cost a lot of money. 
I want to tell your State and local government folks out here, 
you have no idea what this is going to do in terms of the 
counties that you represent that are not achieving these 
ambient air standards.
    Senator Carper.
    Senator Carper. Thank you. A couple of questions if I could 
of Ms. Williams, please. There are a number of ways that we 
could broaden the 1995 Act's coverage to include more laws or 
more regulations that are considered here in Washington on a 
day-to-day basis. Among those that you have talked to, what 
approaches were most popular?
    Ms. Williams. They really broke out into two categories. 
One would be the provisions that deal with procedural changes, 
acts that are included, for example, in appropriations bills or 
rules that are issued by independent agencies. Under UMRA those 
are currently excluded from UMRA coverage. So those are two 
examples of procedural changes that could be made to broaden 
coverage under UMRA.
    The parties also mentioned looking at some of the 
definitions in UMRA and revisiting certain specific exclusions. 
I think CBO mentioned conditions of Federal financial 
assistance as one possible area that could be looked at that is 
an exclusion under UMRA that could be revisited.
    Senator Carper. You point out in your report that some 
stakeholders you spoke to actually like the narrow scope of the 
bill, the Act?
    Ms. Williams. Yes.
    Senator Carper. And do not favor broadening it. What 
reasons did they give for continuing with the current limits 
that are placed on these kinds of laws and regulations?
    Ms. Williams. They varied. Some parties felt that the 
strength of UMRA in its narrow coverage is that it does not try 
to be more than it needs to be. Some also felt that because the 
scope is narrow, when a provision does meet the threshold for a 
Federal mandate under UMRA it results in a significant red 
flag, so when this happens it is a big enough issue that people 
take notice and they are willing to negotiate and make 
adjustments. If the Act is broadened, then it may decrease the 
effectiveness of the red flag if more red flags are constantly 
going up.
    Senator Carper. Dr. Robinson, my question to you would be 
how often do the enforcement mechanisms that are part of the 
1995 Act ever encourage the lawmakers, guys like us, to modify 
our proposals? That is the first part of the question. And 
second, would this change if they were strengthened in some 
way?
    Ms. Robinson. Well, the first part of your question is 
actually pretty hard to quantify because although we 
transmitted 5,200 formal estimates, many of those were preceded 
by informal consultations with members and their staff asking 
whether or not their specific provision was going to cause a 
mandate. And we have seen----
    Senator Carper. Did the lawmakers initiate those inquiries 
or their staffs?
    Ms. Robinson. Yes. They will bring the legislation to us, 
the draft legislation to us, and then we have to work with it.
    Senator Carper. And that occurs in you say the majority of 
cases?
    Ms. Robinson. No, I would not say the majority of cases, 
but I would say that before we actually do an estimate of a 
major bill, we oftentimes have done an informal consultation 
and in terms of time, effort, and feedback that we give to 
committees that work often swamps the final estimates when we 
are looking at the formal legislation. And we see routinely 
that members are concerned that when we raise a flag, they want 
to approach that and consider whether or not it is worth it in 
their whole scheme of getting the legislation through.
    The House has brought up points of order in its 
considerations. The Senate has considered bringing up points of 
order, but I don't think it ever actually has. So that is an 
example where there was a flag raised and before there was even 
a vote there were negotiations to avoid imposing a mandate. So, 
yes, I think that we do see quite a lot of legislative movement 
around these issues.
    And then your second question was?
    Senator Carper. Would this change if these mechanisms were 
strengthened in any way?
    Ms. Robinson. I think that is hard to tell. I think that 
there is a benefit of having a rigorous definition that people 
understand so that they understand across bills what 
``mandate'' means. If that were to be expanded in a number of 
the ways GAO has talked about and people became used to that 
information and could use it, I think that the more information 
routinely is better. The more estimates that people can 
understand and compare to other versions of bills that are 
addressing the same issue, the better. Analysis like that does 
help.
    So in terms of the effectiveness and the red flags, it is a 
little hard to--it is one of these things like estimating cost 
under UMRA. It is like saying, OK, what is actually going to 
happen 5 years from now once the new regime is in place, and 
how are people going to be acting then?
    I do firmly believe, however, that more information is 
better.
    Senator Carper. Thanks.
    Dr. Graham mentioned there are three solutions I think to 
the unfunded mandate dilemma. And first, he said fund them, 
which could get to be expensive; and second, I think he said 
reject the unfunded mandates. I think the third he said was 
find less costly ways of achieving the purpose or the objective 
of the unfunded mandates. Is that a fair characterization?
    Mr. Graham. Yes, sir.
    Senator Carper. Let me just ask Dr. Robinson and Ms. 
Williams, is that pretty much the universe of alternatives that 
we face? Are there others that we ought to be mindful of?
    Ms. Williams. I think if you look at the information we 
collected from the parties, they generally more or less break 
out into those broad categories, and I think all of them need 
to be on the table and part of the debate as you go forward. I 
would also imagine there probably is a fourth alternative if 
you talk to the parties and reach for it.
    Senator Carper. Dr. Robinson.
    Ms. Robinson. This is also a serious case of it depends. It 
really does depend on the mandate in question whether or not 
you need States and localities and the private sector to be 
putting forth their own resources in order to effectively 
administer the mandate. That is always a serious question, and 
sometimes there is not an option to do nothing. That 
information exists about issues that the legislation is 
addressing. Congress has made that determination, so at that 
point their question is, how are we going to do it, and whether 
or not it involves a mandate.
    I am sure that is the universe. It is almost tautological 
to say it is the universe, and I think it is. But the choice of 
alternatives depends on the mandate in question.
    Senator Carper. Thanks. My thanks to each of you.
    Senator Voinovich. If there are no further questions, we 
would like to thank you very much for being here today, and 
there will be some questions from the Members of this 
Subcommittee in writing, and we would appreciate your 
responding to them. We will leave the record open for that.
    And again, this has been quite illuminating, and I will be 
working with Senator Carper to see if there are some things 
that we can do to improve upon this legislation or decide to 
let it continue to go as it is.
    Thank you very much.
    Mr. Graham. Thank you.
    Ms. Williams. Thank you.
    Ms. Robinson. Thank you.
    Senator Voinovich. Dr. Graham, if you could do that for me, 
I would be grateful, on the safe Drinking Water.
    Mr. Graham. We will look into it.
    Senator Voinovich. Thank you.
    We will get started with our second panel. We have with us 
today Delegate John Hurson from Montgomery County, Maryland, 
who is testifying here on behalf of the National Conference of 
State Legislatures. We are very glad that you are here today.
    Commissioner Colleen Landkamer from Blue Earth County, 
Minnesota, representing the National Association of Counties, 
NACO.
    And Council Member Nick Licata from Seattle, Washington, 
representing the National League of Cities.
    We thank you both for being here, and Mr. Licata for coming 
a long distance to testify here today. As I mentioned to the 
other witnesses, we would like you, if possible, to limit your 
testimony to 5 minutes. Be assured that your testimony will be 
in the record. We will proceed with Delegate Hurson.
    Senator Carper. Mr. Chairman, before you proceed, as you 
all know, we have a number of hearings that are going on at the 
same time. We have a hearing in my Banking Committee on 
Terrorism Risk Reinsurance, and I am going to have to slip out 
in just a moment. I apologize for that. We have not figured out 
how to clone us yet and we are still looking. [Laughter.]
    Thank you. Thanks for being here.
    Senator Voinovich. I would just like to explain to the 
witnesses too. This is a Subcommittee hearing. It is a subject 
that I am very interested in, and so is Senator Carper and so 
are the Members of the Subcommittee. But you ought to know that 
I could be at three different places right now and justify my 
presence at each one of them. So it makes it difficult. I think 
one of our problems here in the Senate is a lot of us are very 
busy with lots of committees, and so often we like to be at 
hearings and we just cannot make them because in my case there 
are a couple other things that I could be at, but I am here, 
because I am the Chairman of the Subcommittee.
    My first year in the Senate, I was on five committees at 
the time, and we were trying to figure out how to be in four or 
five different places at once, and we created these cardboard 
cutouts of me, and we would position them at the different 
hearings. And it worked for a while, but people started saying 
I seemed stiff. [Laughter.]
    So we gave that up.
    I want to, I am sure on behalf of everyone here, to thank 
both of you for being here because UMRA is a very important 
subject and we want to thank you for paying as much attention 
as you do to it.

 TESTIMONY OF HON. JOHN HURSON,\1\ DELEGATE, MARYLAND HOUSE OF 
    DELEGATES, AND PRESIDENT, NATIONAL CONFERENCE OF STATE 
                          LEGISLATURES

    Mr. Hurson. Chairman Voinovich, Senator Carper, I am John 
Hurson, President of the National Conference of State 
Legislatures and a member of the Maryland House of Delegates. I 
appear before you on behalf of NCSL, a bipartisan organization 
representing the 50 State legislatures and the legislatures of 
our Nation's commonwealths, territories, possessions and the 
District of Columbia. Thank you for the opportunity to testify 
before you today about UMRA. Thank you, Mr. Chairman, for your 
efforts and leadership as Governor of Ohio that helped UMRA 
become a reality a decade ago and for your continued commitment 
in the U.S. Senate to review how it is working.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Hurson appears in the Appendix on 
page 00.
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    My presentation today will highlight the effectiveness and 
limitations of UMRA, the impact of those limitations on State 
budgets and the need for substantive and technical changes to 
UMRA. I would like to request that a copy of NCSL's March 10, 
2005 Mandate Monitor be submitted for the record to accompany 
my testimony.
    Senator Voinovich. Without objection.
    Mr. Hurson. NCSL applauds the success of UMRA and the work 
of the Congressional Budget Office in particular in bringing 
attention to the fiscal effects of Federal legislation on State 
and local governments, improving Federal accountability and 
enhancing consultation.
    CBO's recent report which identifies five laws that crossed 
UMRA's threshold speaks loudly for its effectiveness.\1\ The 
hundreds of fiscal analyses completed by CBO show a commitment 
to carry out the spirit and letter of the law. Both of these 
facts, however, mask some of the statute's shortcomings that 
NCSL urges you to address.
---------------------------------------------------------------------------
    \1\ The CBO's report entitled ``A Review fo CBO's Activities in 
2004 Under the Unfunded Mandates Reform Act,'' March 2005, appears in 
the Appendix on page 00.
---------------------------------------------------------------------------
    UMRA is limited, and I believe the GAO's May 2004 report to 
you concluded the same thing. As a result, much is slipping 
under UMRA's radar and intensifying pressures on State budgets. 
NCSL has identified a $51 billion cost shift in Federal funding 
to States for fiscal years 2004 and 2005 collectively.
    Senator Voinovich. Fifty-one billion?
    Mr. Hurson. Fifty-one billion, 5 percent of States' general 
revenue funds annually. And the cost shift continues and will 
likely grow in fiscal year 2006.
    Mr. Chairman, legislators view mandates more expansively 
than UMRA's definition. We believe there are mandates when the 
Federal Government, for instance, establishes direct Federal 
orders without sufficient funding to pay for their 
implementation, or establishes a new condition of grant aid, or 
reduces the Federal match rate or administrative funds 
available without a reduction in requirements. It may be a 
mandate to compel coverage of certain populations under a 
current program without providing full or adequate funding for 
this coverage, or a mandate occurs when we create under funded 
national expectations.
    To illustrate our concerns our written testimony provides 
examples of provisions contained in three bills enacted during 
the 108th Congress that were not considered intergovernmental 
mandates under UMRA, but did create significant cost shift to 
the States. This includes an excise tax on vaccines, under 
funding IDEA, the Individuals with Disabilities Education Act, 
and provisions in the Medicare prescription drug program.
    I would like to spend the remainder of my time, however, 
not focusing on the past, but on the future of UMRA. We seek 
your support to strengthen UMRA. This hearing, as well as the 
work of GAO, is an excellent start. We suggest that Members of 
this Subcommittee sit down with legislators, governors and 
county and city officials to develop broader protections to 
States and localities against these cost shifts. Specifically, 
NCSL encourages the Congress to examine the definitions of 
UMRA. Too many mandates are falling outside of UMRA's review.
    The biggest example for our members is the No Child Left 
Behind Act. We believe Congress should revisit how UMRA treats 
entitlement and mandatory spending, in particular Medicaid. 
Most changes made on Capitol Hill to the Medicaid program--
which I know in Maryland constitutes approximately 17 percent 
of State expenditures--affect State spending. The cost of these 
changes, direct or indirect, need to be recognized. States do 
not always have the flexibility to absorb these costs.
    Congress should establish greater Executive Branch 
consultation. CBO does a great job, but we do not receive the 
same level of consultation or information from Federal 
departments or the Joint Committee on Taxation.
    Congress should consider the cumulative impact of mandates 
and consider developing a look-back process.
    Congress should support Section 403 of the fiscal year 2006 
Senate Budget resolutions, which strengthens the existing point 
of order against legislation imposing unfunded Federal mandates 
by requiring 60 votes to waive the point of order.
    Mr. Chairman, in closing I would like to add that NCSL 
remains steadfast in its resolve to work with Federal 
policymakers to reduce the Federal deficit and to maintain 
critical programs. Controlling the deficit is a daunting task 
involving difficult choices, many of which involve our 
intergovernmental partnership.
    We recognize that the pressures on the Federal budget 
promote a tendency to seek the accomplishment of national goals 
through Federal mandates on State and local governments. 
However, NCSL is encouraged that you and other Federal 
lawmakers have recognized the difficulties posed by the cost 
shifts to States, and we look forward to working with you on 
this important issue.
    Thank you for the opportunity to testify and I would be 
happy to answer any questions.
    Senator Voinovich. Thank you very much. It was great 
testimony.
    Mr. Hurson. Thank you.
    Senator Voinovich. Commissioner Landkamer.

  TESTIMONY OF HON. COLLEEN LANDKAMER,\1\ COMMISSIONER, BLUE 
  EARTH COUNTY, MINNESOTA, AND FIRST VICE PRESIDENT, NATIONAL 
                    ASSOCIATION OF COUNTIES

    Ms. Landkamer. Chairman Voinovich, I want to thank you for 
the leadership you have shown on this. You are really making a 
difference on such a critical important issue.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Landkamer appears in the Appendix 
on page 00.
---------------------------------------------------------------------------
    I am Colleen Landkamer. I am a County Commissioner from 
Blue Earth County, Minnesota, and I am proud to serve as First 
Vice President of the National Association of Counties and to 
testify before you today on our decade of experience with 
Unfunded Mandates Reform Act.
    I would like to submit for the record a copy of a recent 
snapshot survey on unfunded mandates that was conducted by the 
National Association of Counties.\2\ This survey includes 
information that in Blue Earth County, Minnesota over the past 
3 years, it shows that we have spent the following for every 
family of four. For every family of four we have spent $8 to 
comply with the Americans with Disabilities Act, and another $8 
for the Help America Vote Act. For every family of four we have 
spent $3 to comply with the Health Insurance Portability and 
Accountability Act. For every family of four we have spent $11 
under the Resource Conservation and Recovery Act, and for every 
family of four we have spent more than $26 to comply with the 
Clean Water Act and the Safe Drinking Water Act.
---------------------------------------------------------------------------
    \2\ The survey entitled ``Unfunded Mandates: A Snapshot Survey,'' 
March 2005, appears in the Appendix on page 00.
---------------------------------------------------------------------------
    Now, this may not be too much to spend to ensure that our 
public buildings and transportation systems are accessible, or 
to purchase new voting equipment, or to ensure the privacy of 
health information or safe drinking water. However, the costs 
continue to add up. If the examples highlighted in this survey 
are extrapolated across the entire Nation, then counties have 
spent at least $40 billion since fiscal year 2003 to comply 
with just a few major unfunded mandates, and far more than 
that, to comply with all of the Federal mandates.
    Mr. Chairman, I was with you in the Rose Garden when the 
Unfunded Mandate Reform Act was signed into law. We applauded 
it then and we still do today. Unfortunately, many of the 
unfunded mandates continue to be enacted without heightened 
scrutiny. The following 10 loopholes in the Act are explained 
in further detail in my written testimony, but let me briefly 
go through the 10.
    First. It identifies only the anticipated cost of proposed 
new mandates, not the actual cost.
    Second. It dismisses the cost of mandates that enforce a 
constitutional right and provide for the national security. For 
example, counties administer elections and ensure the safety of 
our citizens. However, the importance of these responsibilities 
should not get the Federal Government off the hook in paying 
its share.
    Third. It excludes grant conditions, even though local 
governments rarely have the chance to opt out.
    Fourth. It does not address the costs that State and local 
governments bear because the Federal Government has failed to 
address a national problem such as uncompensated health care, 
the costs of which are skyrocketing.
    Fifth. Agencies have inconsistent interpretations of their 
responsibilities under the Act.
    Sixth. It does not apply to mandates on an appropriations 
bill or rules that are issued by an independent agency.
    Seventh. Congress can satisfy the Act by authorizing funds 
for a program even if these funds are not appropriated.
    Eighth. It excludes Federal legislation that indirectly 
reduces State and local tax bases or drives up costs.
    Ninth. A mandate that costs a single jurisdiction tens of 
millions of dollars would still be considered de minimis if it 
fails to meet the nationwide threshold specified by the Act.
    Tenth. It is not surprising that the unfunded mandate point 
of order has never been raised in the Senate since it only 
takes 50 votes to override. We support the provision of the 
Senate budget resolution that would increase this threshold to 
60, and view it as a first step toward strengthening the Act.
    I would like to highlight one mandate that is creating 
challenges for my county, Blue Earth County, and counties 
across this Nation. The Help America Vote Act requires counties 
to purchase new voting equipment by the end of this year. The 
Federal Government was supposed to issue standards for this 
equipment 2 years ago, and has not, leaving counties uncertain 
about when we will be able to comply.
    Now, counties are committed to guaranteeing access to the 
polls and ensuring the integrity of the vote, and to make 
certain that we are purchasing the right equipment, it is 
critical for the Federal Government to release those standards 
and give counties more time to meet those deadlines. The 
deadline is the 1st of January and there is not enough time.
    Mr. Chairman, I thank you for the opportunity to share the 
views of the National Association of Counties. I look forward 
to working with you to strengthen and close loopholes in the 
Unfunded Mandates Reform Act.
    This concludes my testimony and I am ready to answer 
questions. Thank you.
    Senator Voinovich. Thank you very much. Mr. Licata.

TESTIMONY OF HON. NICK LICATA,\1\ CITY COUNCIL MEMBER, SEATTLE, 
     WASHINGTON, ON BEHALF OF THE NATIONAL LEAGUE OF CITIES

    Mr. Licata. Thank you, Chairman Voinovich and Senator 
Coburn, for the opportunity to speak to you today. I am Nick 
Licata, a City Council member from Seattle, Washington, and I 
am here to testify on behalf of the National League of Cities 
about how federally funded mandates financially squeeze 
municipalities and often hinder our ability to provide services 
to our residents. Please note that my extensive written remarks 
have been submitted for inclusion in the Congressional Record.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Licata appears in the Appendix on 
page 00.
---------------------------------------------------------------------------
    Before I begin my remarks, I would also like to thank the 
Senator from Ohio for examining unfunded mandates and, in 
particular, for requesting the GAO study of the Unfunded 
Mandates Reform Act.
    Now, as early as 1991, NLC adopted as policy the position 
that Federal mandates that imposed direct costs must be 
accompanied by adequate Federal funding. Local governments 
nationwide recognized the passage of the Unfunded Mandates 
Reform Act, UMRA, in 1995 the key partnership tool with the 
Federal Government.
    Ten years later, America's cities and towns are financially 
burdened by unfunded mandates and preemptions of State or local 
authority in some form. Some quick examples are the No Child 
Left Behind Act, Individuals with Disabilities Education Act, 
Federal tax reform, Internet tax, and environmental 
regulations.
    As recently as last night, the House Committee on Energy 
and Commerce voted to pass a multi-billion unfunded mandate to 
local governments. It did that when it rejected an amendment to 
strike a provision from the energy bill forcing local 
governments to clean up water contaminated by the gas additive 
MTBE. In the last Congress, there were also legislative 
proposals to require local governments to enforce civil 
immigration laws, essentially a Federal function, or risk the 
denial of reimbursement from the Federal Government.
    Now, let me share with you what is happening in Seattle as 
a result of homeland security, which has the unintended 
consequence of an unfunded mandate. Our taxpayers and public 
utility ratepayers have picked up more than half the costs 
emanating from homeland security mandates and guidelines. Since 
September 11, 2001, they have paid out close to $46 million, or 
53 percent of the total costs. I am prepared to answer in 
detail the findings of a report prepared by our city auditor, 
and this document is included in Appendix A of this testimony. 
And I believe this is the first and maybe the only concluded 
study of homeland security unfunded mandate costs in 
municipalities across the country.
    Briefly, there are three factors that contribute to the 
federally unfunded homeland security costs. They are as 
follows:
    In order to adequately protect our citizens, the city 
complies with the post-September 11 guidelines from the Federal 
Government, regulatory agencies, and professional 
organizations. There are no Federal grants available to cover 
these costs.
    Second, in order to provide our heightened security 
measures, additional ongoing staffing for homeland security 
must be hired. Seattle has spent close to $18 million since 
September 11 for which there were no Federal grants available.
    And, third, in order to conduct vulnerability assessments 
of our city's operations and critical infrastructure, eight of 
our city departments indicated they have unmet infrastructure 
needs because the grants from Federal agencies, including the 
Department of Homeland Security and the Environmental 
Protection Agency, restrict the city's flexibility.
    Please keep in mind that during this time Seattle has spent 
an additional $46 million unexpected security costs since 
September 11, we have cut our local budget by over $100 million 
due to the downturn in the national economy. As a result, 
services have been reduced to our residents. And Seattle is not 
alone in this situation. I have attended a number of NLC 
meetings and talked to representatives from municipalities 
across the country, and the same story is repeated again and 
again in city after city.
    I and other municipal elected officials believe that the 
GAO, the CBO, and other reports have confirmed that the 
financial threshold exemptions under UMRA disguise an accurate 
assessment of unfunded mandates. And let me conclude by 
identifying four NLC proposals for addressing this problem.
    Amend UMRA to increase to 60 the number of Senate votes it 
takes to enact legislation that imposes unfunded Federal 
mandates. The State and Local Government Association sent a 
letter to the conferencees on the budget resolution supporting 
a supermajority in the U.S. Senate to override an unfunded 
mandate point of order.
    Second, Congress should not allow any Federal statutes to 
preempt a local law unless the Federal law specifically states 
there is such a conflict.
    Third, Congress should reconsider the threshold amount 
established in UMRA. While the $50 million threshold, adjusted 
for inflation annually, may seem low by Congress' estimate, its 
cumulative effect damages the fiscal health of our 
municipalities.
    And, last, NLC would like Congress to enact clear and 
unequivocal language that mandates that Federal agencies 
consult with State, local municipalities, and local government 
officials in the development of the proposed rules.
    Thank you for the opportunity to testify.
    Senator Voinovich. Thank you very much. There seems to be a 
consensus here among the witnesses about the state of unfunded 
mandates relief legislation. [Laughter.]
    And before I forget, I would challenge the organizations to 
get together and come back to me and this Subcommittee with a 
consensus on what it is that you folks think we need to get 
done. And I assure you that if you do that, all of you--in 
other words, I know that the National Governors' Association 
wanted to be here. They are not here. They are very interested 
in this issue. The U.S. Conference of Mayors I know is very 
interested in this. I have talked to Mayor Plasquellic. He is 
very interested in this. And I think it would be really good if 
you put together a little task force and sat down and you got 
your respective reports and just see how they kind of coincide 
with each other, and then come back here with your priorities 
in terms of what things you think are going to make the most 
difference in terms of our improving this legislation. Which 
leads to my first question: What is it you think would be the 
No. 1 issue that we need to deal with?
    I am pleased the budget includes a program to reverse the 
point of order. I applaud that provision of the bill. However, 
some of us are going to have some other problems with the 
budget. But I can tell you that the budget enforcement 
mechanisms that I worked very hard to get into that budget, 
plus Senator Gregg's going along with the 60 votes, are very 
important things to me and will come into my consideration when 
they finally get out of conference committee.
    So who wants to start?
    Mr. Licata. Well, I will jump in and say that the $50 
million threshold, I think, is one of the critical elements. 
That is in our estimation too high and that we need to lower 
that threshold.
    Also, communication is critical. The Federal agencies need 
to talk to local officials about these rules. Without the 
communication, often we are in the dark, and we only find out 
at the last moment.
    Senator Voinovich. You heard me ask the question of John 
Graham about what procedure is in place to get the input of 
State and local governments, and I saw some heads out there 
saying they did not agree. So your opinion is that in terms of 
regulations dealing with State and local governments, there is 
no procedure in some of these agencies to sit down and talk to 
you about the impact it is going to have?
    Mr. Licata. Inconsistent and inadequate would be our 
experience.
    Mr. Hurson. I would echo that. I think that was a very good 
question, Mr. Chairman. While CBO in particular has been 
excellent in trying to work in terms of consultation, in 
general it is sporadic. And I think that sort of came through 
in the answer in terms of what kind of treatment we get from 
agencies in terms of consultation. That is a very important and 
significant point.
    Senator Voinovich. OK. What else?
    Ms. Landkamer. It is significant. There is no doubt about 
that. And I think it is critical for us to come back to you and 
talk about priorities, and we would love to do that.
    Mr. Hurson. I am sure that NCSL will be committed to doing 
that kind of task force. I think it is an excellent idea.
    The one thing I would highlight is the first thing we 
mentioned. We do think there are some definitional problems. We 
are not getting all of the things we need covered by UMRA. 
Things are slipping underneath the definitions, and we need to 
tighten the definitions up in such a way that we truly do get 
at some of these unfunded mandates. Particularly for States, 
Medicaid is the Pac-Man of all these budgets. It is eating us 
alive. It is eating the Federal Government alive. It is eating 
State budgets alive. And very small changes in Medicaid 
requirements have huge effects upon State budgets, and we do 
not have the flexibility to absorb the costs because of 
balanced budget requirements.
    And again, it is a definitional issue, and I think if we 
tightened up some of the definitions, we would be well on our 
way to reforming UMRA in a good way.
    Senator Voinovich. Again, in the definition area, I know 
when we passed UMRA initially, there was a lot of debate about 
the definition. But it's been 10 years now, and we can go back 
and say, here is what has happened because certain things were 
excluded or were not included.
    Mr. Hurson. It is a good time to review it. It really is.
    Ms. Landkamer. I agree with everything my colleagues have 
said, and I do think the lookback is critical to see what 
works, what the definitions are, and actually what the cost of 
mandates have been, because I don't think we have looked at 
that.
    Senator Voinovich. Senator Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Well, I would make note that we just passed 
out of Committee S. 21, which should offer, especially Seattle, 
some leverage in terms of homeland security and more of the 
requirement for it to be on needs-based, risk-based, rather 
than just on population-based granting. And I think you are 
going to be pleased with that. We will see how the 
appropriators do with that, but it is our hope that bill will 
get through both the Senate and the House and get some common 
sense into the funding.
    My experience from the people I have dealt with in 
Oklahoma, it is not that there is minimal consultation. Most of 
the time there is no consultation from the Federal Government. 
And when you find out what the rules are, it is when they are 
published in the Federal Register, and you have 30 days to try 
to mobilize and to change those.
    And I would just tell you that I would tend to agree with 
what you said. I would apologize for not being here. I am 
trying to shuffle between three committees today. But common 
sense is the thing that is lacking. It looks good up here, but 
you have to remember this is a very small, hollow network that 
does not rely on common sense and does not see the results of 
things that are put out.
    So I look forward to working with the Chairman on that. I 
look forward to going through this to see what the GAO has said 
and understand that and try to change it.
    I think the threshold problem is more difficult than the 
definitional problem for us in Congress, because I think 
Federal agencies can get around the threshold problem, but I do 
not think they will be able to get around the definitional 
problems. And if we can tighten those up, I think they would be 
great.
    With that, I guess I don't really have any questions other 
than to say I am sorry we have not done our job to make sure 
you can do your job.
    Mr. Licata. I would like to thank Senator Coburn and others 
for the S. 21 bill. We really do appreciate the emphasis on 
threat regarding homeland security, and I hope there is 
successful passage of that legislation.
    I again want to thank Chairman Voinovich and the other 
Senators for their concern about this issue. I think we will 
take up your challenge to get together and come back to you 
with some solid proposals that we can all work together on and 
do something about this problem.
    Senator Coburn. Could I address Medicaid again?
    Senator Voinovich. Certainly. I have some more questions, 
too.
    Senator Coburn. I just think the points you raised on 
Medicaid is the prime example, and we need total reform in 
Medicaid. But we do not need to reform it just here. We need 
the input of the States as we make this a more flexible problem 
for the States to decide how they care for the people in their 
State. It is different in every State; the requirements and the 
needs are different. And one of the things I am going to be 
working on is to try to do that over the next couple of years, 
at least build a consensus in terms of reforming Medicaid so 
that it is more flexible, so that you have the ability to 
really do what you want to do in the State to help those that 
are depending on us.
    Senator Voinovich. On the Medicaid issue, I have a little 
difference of opinion than some of my colleagues. I voted 
against the amendment to create the commission to study it 
because I felt that what we were doing was limiting the 
increase of Medicaid over the next 5-year period. And I was 
assured by the former Governor of Utah, Mike Leavitt, that he 
was negotiating with your respective organizations on five 
major flexibilities that would give you some things that we 
asked him to do when I was governor of the State of Ohio.
    Mr. Hurson. Well, Secretary Leavitt actually is meeting 
with us tomorrow on just those issues. He is speaking at NCSL's 
Spring Forum here in Washington. So, yes, we are working with 
him on all kinds of Medicaid reform.
    Senator Voinovich. But I think that former Governor Leavitt 
gets it. I know one of the things that I had in our State when 
we reformed Medicaid, I wanted to charge a fee for Medicaid, 
and they said you cannot do that. And there are a lot of small 
provisions there that we could do, and it is amazing that a lot 
of our health clinics throughout the State of Ohio today have a 
sliding scale. Somebody comes in, they find out what their 
income is, and there is a sliding scale and the recipients pay 
according to their ability. But you are hamstrung with so many 
of these regulations that you are getting money out of DC.
    Mr. Hurson. Mr. Chairman, that is absolutely true. In the 
State legislature I am the Chairman of our Health Committee, 
and I will tell you that we are looking very closely at what 
federally qualified health clinics can do and really using them 
more as a safety net. But the thing with Medicaid is that it is 
a partnership. We have to do this together. It is a situation 
where it has to be reformed. If we are ever going to solve the 
deficit at the Federal level, and in terms of the State 
budgets, it has got to be a partnership. But we know it has to 
be reformed. You talk about the clinics. They are the answer, 
in my opinion, about how we can go about creating a new system 
of health care that is not bound by all these rules and bound 
by all these controls, because what we are trying to do is get 
health services to people and not be bound by a lot of rules. I 
think we can find a way to do that in a much less expensive way 
if we work together.
    Senator Coburn. Mr. Chairman, just to roll on the Medicaid, 
right now Medicare and Medicaid dictate health care in America. 
Health care does not dictate Medicaid and Medicare. It is 
exactly backwards. We are going to spend $2.3 trillion this 
year in our economy--that is close to 18 percent of our GDP--on 
health care. That is 40 percent more than any Nation in the 
world does per capita. And one out of every three dollars we 
spend does not help one person get well.
    Certainly we can do it better, and if we do it better, we 
are going to free $700 billion a year to use in other areas, 
both at the State and the Federal level. And I am committed to 
see that happens.
    Now, that is a big task, but there is no prevention 
incentive for providers. We do not pay them for prevention. We 
pay them to treat acute disease and chronic disease. Prevention 
will save us tons. Half of Medicare and Medicaid spending in 
the year 2050 is going to be on diabetes alone. And diabetes 
today is a preventable disease, and yet there is no leadership 
at the Federal Government level in terms of prevention of that, 
and colon cancer and all these other diseases that we know are 
preventable.
    So I believe--and I hope through my Subcommittee and your 
Subcommittee that we are going to be able to discover some of 
the areas where we can change this. And it is a burden on the 
States, but it is not just a burden on the State Governments. 
It is a burden on every business in your State.
    Last month alone, 15,000 jobs were not created in this 
country because of the sole cost of health care insurance for 
individuals who would have been hired, many in Ohio, because 
they cannot afford that premium so, therefore, they do not add 
another person to the payroll even though they need it.
    Senator Voinovich. I agree with you 100 percent, Senator 
Coburn. I recall when I was governor we did really well with 
job creation and, in fact, Ohio led the country in new 
facilities and plant expansions. But my governor today is 
contending with some things that I did not have to contend 
with: Escalating health care costs that are just driving 
businesses away. Natural gas costs have escalated 
substantially, and you are all feeling it on the local level. 
This litigation tornado that is cutting through our society is 
raising our costs. The competition with China today in terms of 
their currency and intellectual property rights. I mean, there 
are a number of things that impact on your local lives. People 
in the State are saying, well, governor, take care of it. 
Governor Taft in Ohio, I feel sorry for him. There are just too 
many factors beyond his control. He can change around the 
direction in IT jobs, biomedical and all other high-tech jobs. 
But on the basic things, if we do not do something on the 
national level on some of these issues, they are finished. We 
will see more and more jobs leave this country because of the 
fact that businesses can no longer compete because of our 
regulatory environment.
    As I mentioned, you ought to look at the new ambient air 
standards. No one is really getting it. I tried to get Clear 
Skies passed here, and I did not get the kind of support that I 
should have, I think, from State and local governments. And I 
said the reason why is because you do not get it yet. But when 
you get it, you are going to be really concerned about this 
because it is going to impact negatively on your ability to 
keep jobs, get businesses to expand, and get businesses to come 
into your communities.
    Senator Coburn. I would just add one comment. Almost 7 
percent of the cost of health care today, 6.8 percent, is $130 
billion worth of tests that doctors order every year that 
patients do not need but doctors need. And that is directly 
related to the tort system failure in this country. And we 
could lower the cost tomorrow by 7 percent, health care across 
the board in this country, if we just had malpractice reform in 
this country.
    Senator Voinovich. I would like to ask you a question about 
something specifically. Some of you said that we have not used 
UMRA, point of order in the Senate. But I was interested to 
hear testimony that, in fact, Senators, at least their staffs, 
check with CBO to find out whether or not this is an unfunded 
mandate or not and that legislation is changed because of it or 
amendments are made to try and alleviate that pressure on State 
and local governments.
    I will tell you that, without UMRA, we probably would not 
have been able to stop last year, with the help of your 
respective organizations, the Internet tax moratorium. And I 
just want to point out that the bill will expire in 2007. 
However, some States that are now turning high-speed Intenet 
access will lose their ability to do so this year. Fortunately, 
Ohio and Washington are grandfathered in and won't lose that 
ability. But Michigan and Maryland will lose some revenue. Have 
you looked at this issue at all?
    Mr. Hurson. I cannot say that our State, but I know that 
NCSL is very active on this issue, as you know. But we actually 
list the ban as a mandate as well.
    Let me just make one quick comment that I think is 
important to State and local governments. This always happens 
when you have a problem, but UMRA has done a lot of good 
things. We think we are on the right road. The question now is 
reanalyzing it after 10 years of experience and fixing things 
that may not have been what we expected to happen. But, 
generally speaking, it has been a very positive experience for 
our organization and for States that we have something in place 
that does the review.
    As I said in my testimony, we think CBO has done a really 
good job of making sure that a lot of laws are analyzed. So to 
be positive, we are going in the right direction. We just need 
to reform it.
    Senator Voinovich. Well, we look forward to your 
recommendations, and I am going to have my staff go through all 
the reports and come back to me with their recommendation on 
what their priorities are, and then what I will do is wait to 
see from you what you think they are. And let's get the team 
together. We have not really worked on anything for a long 
time, but last year we got an Internet tax moratorium, and I 
have said to Mayor Plasquellic and I have said to other leaders 
of the organizations that you have unbelievable power. You have 
unbelievable power. If you all work together, prioritize your 
issues, and come to Congress on a bipartisan basis, you can 
move mountains. But each of your groups individually have great 
difficulty in doing that, and I think that is something that I 
want to underscore. This might be a great issue to get the team 
back together to talk about some other things that we ought to 
be working on together.
    I cannot do it here. Tom cannot do it over there. But, if 
we have a legislative proposal up here and you folks are 
lobbying for it together and on a bipartisan basis, you will 
move mountains. You will make a difference.
    So I am looking forward to working with you. Thank you very 
much. The hearing is adjourned.
    [Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


                PREPARED STATEMENT OF SENATOR LAUTENBERG
    Mr. Chairman, thank you for calling this hearing.
    When I arrived at the Senate 22 years ago, I discovered that my 
desk had once been used by Harry Truman.
    He has always been a hero to me because he wasn't afraid to tackle 
a problem. He famously said, ``The Buck Stops Here.''
    The Federal Government has been too quick to pass the buck to 
States and local governments in the form of unfunded mandates like the 
No Child Left Behind Act. This is wrong.
    Congress should not order State and local governments to provide 
programs without offering the resources to pay for them.
    But we must be clear about what rally constitutes an ``unfunded 
mandate.''
    The Congressional Budget Office has determined that unfunded 
mandates include an increase of the minimum wage, user fees for 
customs, fees on tobacco products, and the Sarbanes-Oxley Corporate 
Reform Act.
    It's one thing to say we shouldn't order States to provide health 
insurance for their citizens without providing the resources to do it--
or impose tough new requirements on schools without adequately funding 
them.
    But the idea that Congress should not be able to raise the minimum 
wage, or balance the budget, or force big companies to protect 
shareholders and consumers, I think is misguided.
    Mr. Chairman, these issues take on new urgency this year because if 
approved, this year's budget would demand a new 60-vote point of order 
to pass an unfunded mandate.
    That means 60 votes to increase the minimum wage . . . 60 votes to 
discourage young people from smoking--60 votes to enforce corporate 
accounting standards.
    So I say to my colleagues: We need to be very careful about what we 
are doing here.
    Mr. Chairman, it isn't just my priorities that would be endangered. 
Some on the other side are engaged in a misguided attempt to cut 
Medicaid, for example. Under current law, that could be an unfunded 
mandate as well.
    We should combat real unfunded mandates without hampering the 
Senate's proper business.


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